No Arbitrage in Continuous Financial Markets

David Criens

Papers from arXiv.org

Abstract: We derive integral tests for the existence and absence of arbitrage in a financial market with one risky asset which is either modeled as stochastic exponential of an Ito process or a positive diffusion with Markov switching. In particular, we derive conditions for the existence of the minimal martingale measure. We also show that for Markov switching models the minimal martingale measure preserves the independence of the noise and we study how the minimal martingale measure can be modified to change the structure of the switching mechanism. Our main mathematical tools are new criteria for the martingale and strict local martingale property of certain stochastic exponentials.

Date: 2018-09, Revised 2020-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://arxiv.org/pdf/1809.09588 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1809.09588

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().